Now A Venture Capitalist, Michael Arrington Steps Down From TechCrunch

With his outsized personality and opinionated nature, tech blog impresario Michael Arrington is no stranger to overshadowing the subjects he covers—and sometimes even becoming the story.

Bloomberg

Michael Arrington, founder of TechCrunch, will move on from the blog he founded to become a venture capitalist full-time.

Now the founder of TechCrunch has stepped into an even bigger spotlight, launching a $20 million venture capital fund with backing from his employer, AOL, which bought his site last year, and from several well-established venture firms. At the same time, Arrington is resigning as managing editor of TechCrunch.

“Mike will run the fund and will continue to write for TechCrunch, but will have no editorial oversight,” said AOL spokesman Mario Ruiz. Erick Schonfeld, who has served as co-editor in New York, will become interim editor while AOL searches for a replacement for Arrington, Ruiz said.

It’s not immediately clear the fate of AOL’s venture capital arm, AOL Ventures, which has made recent seed investments in start-ups such as spam-defense company Impermium and price-tracking service Shopobot.

Arrington’s new fund, called CrunchFund, closed today with $20 million, according to people familiar with the situation. AOL leads the limited partner group, which includes a long roster of venture firms that kicked in $1 million each: Accel Partners, Austin Ventures, Greylock Partners, Kleiner Perkins Caufield & Byers, Redpoint Ventures and Sequoia Capital. Several individuals contributed money as well, including Marc Andreessen and Ben Horowitz of the venture firm Andreessen Horowitz, general partners at Benchmark Capital, angel investors Ron Conway and Kevin Rose, and Yuri Milner, founder of Russian firm DST Global.

Arrington’s partner in the fund is Patrick Gallagher, who has been a partner at VantagePoint Capital Partners since 2008.

According to people familiar with the fund, these investors—while all well-networked themselves—sought to be associated with Arrington due to his deep relationships with start-ups via the TechCrunch platform, and for possible co-investment opportunities. These people said that AOL sought to be the sole limited partner of the fund, but that Arrington thought differently. Ruiz didn’t have immediate comment about that.

Arrington wasn’t immediately available for comment. He did post a message on Twitter after news of the fund broke: “slow news day.”

Arrington started TechCrunch in 2005 and quickly built it into a virtual must-read for coverage of young tech companies, which often fight to be showcased on the site. A former lawyer who is famously well-connected in Silicon Valley, Arrington has moved confidently—if not always easily—between the roles of blogger, investor and promoter.

Long an angel investor himself, Arrington announced on TechCrunch in 2009 that he would stop making investments in start-ups, acknowledging a perceived conflict as both publisher and investor. It’s “a weak point that competitors and disgruntled entrepreneurs use to attack our credibility,” he wrote at the time.

But in April this year, after AOL acquired TechCrunch, Arrington announced he was investing in start-ups again, while also becoming a limited partner in venture funds Benchmark Capital and SoftTechVC. Since then, he’s had some highly entertaining, public spats with people who questioned the ethics of backing companies that his site also covers. Arrington has always maintained that transparency and full disclosure keep things above-board when his blog writes about companies he has some financial stake in, and he’s blasted critics for their alleged hypocrisy.

All those questions figure to intensify now that he’ll be running a fund – especially one whose limited partners back dozens of start-ups that are featured on TechCrunch and at its various industry conferences.

But he’s not the only prominent tech-blog founder who also moonlights as a venture capitalist. Om Malik of GigaOm is also a partner at early-stage fund True Ventures.

Comments (2 of 2)

The problem is ever increasing constraint in the early stage
marketplace caused by the increasing incestuous relationships of incubators, seed investors,
media and traditional venture capital and corporate venturing).

The early stage is about the art of investing - the personal reference,
the strong review, the buzz . . . . Later stages rely more on hard facts
and figures - but the early stage can be spun and sold.

The Early Stage Marketplace needs to be collaborative, transparent and inclusive. The early stage needs to be a global community for partnering and funding that serves the self interests of all of its members - sponsoring organizations, sponsored companies, funders and validation partners (corporate development).

As expected this is more hedge-bet by the big names With a friend on a possible lifestyle investment, opportunity vosts dictates quite frequently deal makers in our real world. (Should have read this article before I commented on peHub, glad I was right!).

Congrat. To Mike for sure..

We'll however have to wait 3-5yrs to see some real results, no doubt given his connections & positioning, he'll be able to make some good investment(s) early on..

One can definitely expect some fireworks in terms of best practices of VCs given how vocal Mike can get.. Or not.

About Venture Capital Dispatch

Produced by the editors of Dow Jones VentureWire, Venture Capital Dispatch tracks the fast-moving developments at the intersection of high-tech innovation and venture capital finance. Featuring the VentureWire reporting team in the Silicon Valley, New York, Boston and Shanghai tech centers, Venture Capital Dispatch provides insight into the newest start-ups and latest trends in venture capital investing. Write us at VCdispatch@dowjones.com. For more information on Dow Jones products covering venture capital and other financial markets, go to http://pevc.dowjones.com.